That, in the opinion of this House, the government should implement a “Regulatory Budget”, parallel to the traditional spending budget, which would detail estimates of the total cost of each individual regulation including the government enforcement costs as well as the cost of compliance to individual citizens and businesses; and include a risk/benefit analysis of each regulation, to enable cost/benefit analysis of regulation by parliamentarians.
Mr. Speaker, it is with pleasure that I rise today to debate my private member's Motion No. 207 concerning the introduction of a regulatory budget which would achieve a great deal in a number of realms.
First, there has been a secular decline in the role of the member of parliament over the past 30 years and a reduction in the meaningful role that private members play in conducting and legislating those things that are really important to Canadians. This regulatory budget would go a long way toward restoring some of the traditional authority which members of parliament had back in the days when the estimates were debated on the floor of the House of Commons and before the days when there was such tremendous control and concentration of power, in particular in the PMO and to a certain extent within the cabinet. This would help reverse a certain amount of that. It would also redistribute power that is currently with the bureaucracy and put more of that power in the hands of elected representatives. That would achieve a great good on behalf of Canadians, Canadian parliamentary systems and democracy.
There are two ways the government can change the way Canadians do things. For instance, if a bureaucrat determines that it is in the public interest to have a lawn sprinkler on every lawn in Canada, there are two ways the bureaucrat can achieve that. One way is to whisper in the ear of a cabinet minister that this is a good thing and that the government should buy those lawn sprinklers and distribute them to Canadians, which would entail a tax. Of course, the government would increase taxes, buy the lawn sprinklers and distribute them to Canadians to put on their lawns.
The second way, which is far less transparent and more concealed, would be for the government to introduce a regulation which would force all Canadians to buy lawn sprinklers with their own money and put them on their lawn.
What is the difference? The only difference is that of transparency and accountability, because effectively the same result is achieved with either alternative. Canadians are forced to sacrifice some of their scarce resources in the interest of a public good which is somehow determined by the bureaucracy. Somehow it is determined by big government and by this nanny government state that something is in the interests of Canadians and the government has made a decision that this will be done.
When a bureaucrat believes it is in the public interest that a certain end be achieved, there needs to be transparency and accountability in parliament prior to that change being effected.
Effectively what would occur with a regulatory budget would be that each new regulation introduced by a bureaucrat, before it was actually implemented, would have to pass once a year through a regulatory budget in the Chamber. We would be debating the efficacy or importance of each regulation in the House of Commons in the same way that we debate provisions within the budget.
A regulation is virtually the same as a tax. While we debate tax issues in the House all the time, we rarely debate the regulatory burden that is playing such a significant role in Canada and to a considerable extent is reducing the efficiency and competitiveness of Canadian business and individuals.
I will give some examples. Between 1973 and 1996 federal government regulations grew significantly. In fact we have seen in recent years, during the 1990s, 650 to 1,000 new regulations introduced every year, requiring 4,000 to 5,000 pages of detailed explanation. Furthermore, in the past 20 years there have been over 100,000 new federal and provincial regulations passed. The average, combining federal and provincial, has been about 4,000 new regulations per year in the past 20 years.
As the number of regulations continues to expand, so do the costs of designing, implementing and administering these regulations. The expenditures on federal regulations over the past 20 years have grown in real dollar terms from $2 billion to $2.5 billion, an increase of 26%.
What do these regulations mean to consumers? It is very important to recognize that there are three costs with every regulation. The first two costs, which are borne by the government, are the implementation costs and the enforcement costs. The third cost, the largest cost, which is borne by consumers, is the cost of compliance. These regulations for consumers have cost the average Canadian family about $11,000 per year, federal and provincial regulations combined. That has been an increase in real terms from about $10,000 20 years ago. Total compliance costs to the private sector have increased from $58 billion in 1974 to about $84 billion in 1995-96. That increase has a significant impact, in particular on small business.
Studies suggest that escalating regulatory costs are responsible in part for our lagging productivity growth in Canada relative to the U.S. and other OECD countries. The 1994 small business working committee set up by the federal government shared these thoughts: “Too many regulations are developed and administered with little consideration given to the impact on the competitiveness of small business. Government must regulate less, simplify paperwork, limit information requirements and get out of the way so that small businesses can focus on creating wealth and jobs”.
Unfortunately, Ottawa has abandoned its attempt to make compliance requirements more efficient for business. In their first term the Liberals introduced legislation aimed at allowing companies to propose more cost effective ways of complying with regulatory requirements. However, this legislation was redrafted and ultimately scrapped. It is now necessary to revisit some of these initiatives. We must find ways to encourage more innovative market driven responses to the issue of compliance.
The U.S. is having a similar experience relative to regulations. The cost of complying with American federal regulations has risen to 47% of the federal budget, up from 40% in 1988. There has been an increase in the regulatory burden, both in the U.S. and Canada, with our other trading partners. It is important that we also look at the examples of Japan and European countries in the EU which are also moving to reform regulatory burden issues within their countries. It is important to view what is being done in other countries with respect to tax issues, social investment issues and regulatory issues.
We are in a very competitive global environment and we cannot afford to sit still in Canada while other countries adopt more innovative approaches to some of these very important competitiveness issues.
The notion of costing regulations, taking those three costs that I mentioned earlier, the two government borne costs and the private sector compliance cost, and combining them with the actual benefit of those regulations would provide parliamentarians with an ability to actually debate in the Chamber the importance or the efficacy of individual regulations.
The benefit of a regulation could be provided through a risk/benefit analysis, the methodology for which is very sophisticated and exists within insurance companies and underwriting agencies. We could use that type of methodology to determine the actual benefits of a regulation in order to compare the benefits to the costs of implementing that regulation.
It is very important to realize that there would be cases with a regulatory budget where the costs of implementation and enforcement would exceed the numeric value number of the benefit, but we would still pass that regulation.
I will give an example, which is not a federal regulation. Some provinces and municipalities have bicycle helmet laws. How could we put a price on the prevention of a head injury to a child? It would be very difficult to quantify that kind of benefit. There would be a political will and the recognition of a social good to passing that regulation, even though the numbers may not add up.
I have been asked questions relative to environmental issues. Some would say that it is difficult to quantify the benefits of environmental policy. I would argue to the contrary, that any economic policy which ignores environmental impact is bad economic policy. We should be taking into account environmental costs with every piece of regulation. If we fail to do so, the economics simply will not work because we will fail to internalize the externalities and to take into account the real cost to individuals, both consumers and non-consumers.
All these things can be taken into account. The bottom line is that elected members of the House would have the power to pass or to vote against individual regulations as part of this budget. This would lead to greater diligence in the bureaucracy in introducing regulations, greater scrutiny both by the bureaucracy and within the elected Chamber of these regulations, and ultimately a more effective and efficient regulatory burden which would provide greater benefit to Canadians and wreak less havoc with Canadian enterprises.
Last week I received a letter from the Canadian Federation of Independent Business. I will read some excerpts from it:
Numerous surveys of our members carried out over the years have consistently identified government red tape as a major problem for small and medium size businesses.
The recent survey of the Canadian Federation of Independent Business found that 60% of over 10,000 respondents identified government regulations and paper burden as serious issues for their businesses. Government regulations and paper burden were ranked as the second most important issues behind the total tax burden and just ahead of employment insurance and government debt reduction.
When asked to identify what government priorities should improve their productivity, 44% of respondents identified easing burdensome government regulations. The survey also found that one out of four respondents said that government fees and penalties needed to be made more equitable. Both responses were ranked in the top five actions the government should take to improve small business productivity. They were directly behind payroll, income taxes and paying down the federal debt.
Paper burden and regulations that are present at the federal, provincial and municipal levels saps productivity and wastes valuable time and money, not only for small and medium size businesses but also for the taxpayer and for government. A past survey carried out by the CFIB found that 40% of Ontario small business owners spend more than six hours per week simply filling out forms.
The cost of red tape to the Canadian economy is staggering, costing tens of billions of dollars annually. Some provinces have already taken steps to reduce red tape with the full support and active involvement of the Canadian Federation of Independent Business. In 1995 the Ontario government set up the red tape commission which has so far removed or amended more than 1,300 regulations. More recently the Ontario government announced its intention to set up a permanent red tape watchdog that will subject all new regulations to a strict business impact test.
This summer the New Brunswick government announced that it was setting up a red tape review committee to eliminate regulations that are a barrier to economic growth and job creation.
Garth White, senior vice-president of national affairs for the CFIB, said in his correspondence to me that the CFIB applauded our initiative and urged the federal government to take swift action to cut unnecessary regulations and red tape which hamper productivity and competitiveness and kills badly needed jobs.
We have the support of the small business community in this regard. If Canadians were aware of this initiative we would have the support of the majority of Canadians who understand quite clearly that a regulation is nothing more than a tax. As such we should be debating in the Chamber the importance and effectiveness of individual regulations. I look forward to the comments of my hon. colleagues on this important issue.